If you were evaluating an investment opportunity, which technique would you use and why?
- When evaluating investments, you can get data from engineering, marketing and sometimes accounting. Do you think any of these organizations have internal biases? If so, as a member of the finance department, how would you deal with them?
- You have just discovered that your boss favors payback in evaluating investments. Should you try to talk him out of it or should you go along with his/her desires?
- Last year your company financed its investments by selling shares of common stock. This year the plan is to use debt. The after tax cost of debt is 5%, the cost of equity is 12% and the weighted average cost of capital is 9.5%. The first investment for this year is an expansion project. What cost of capital will you use and why?
- The weighted average cost of capital can consist of debt, preferred stock and equity. Which of these sources is the most expensive and the least expensive and why?
- Young companies usually finance their assets with equity. Why?
Make original posts discussing any three of the following statements. Reference chapters 14,15,17. Total of 300 words to answer all 3 questions.
- Explain how the use of leverage can increase shareholder’s wealth.
- Leverage can also impact you in your personal life. Explain how you can use it to your advantage.
- In theory, what happens to the shareholder’s worth before and after he/she receives a dividend from the company.
- What are the advantages of stock repurchases versus paying dividends?
- What is the impact of a stock split on the value of a corporation? Why do companies do stock splits?
- What is the difference between a stock dividend and a stock split?
- If a company is highly leveraged from an operating standpoint is it more likely or less likely to use financial leverage? Why or why not?
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